British American Tobacco cheered the market by announcing a £1.5bn share
buyback programme, as price rises and smokers trading up to premium brands
helped the cigarette maker overcome falling sales.

The group behind brands such as Dunhill and Lucky Strike also signalled a greater push into new products such as nicotine inhalers and “e-cigarettes”, as it reported a 14.5pc rise in pre-tax profits to £5.6bn in 2012 .

The world’s second biggest cigarette manufacturer has taken the unusual step of creating a new board-level role to oversee “next generation” products.

The move follows its acquisition in December of CN Creative, a UK company that develops technologies such as battery powered, or e-cigarettes.

Des Naughton, currently group operations director, will take on the role of managing director for next generation products.

BAT reported revenue of £15.2bn for 2012, down from £15.4bn as it was hit by currency fluctuations.

Stripping out the effect of currency movements, revenue grew 4pc to almost £16bn, the group said.

Sales volumes dropped 1.6pc to 694bn amid a tough economic and regulatory environment in key markets such as Europe, where governments are cracking down on smoking.

However the group, which also owns brands such as Pall Mall and Kent, has been able to mitigate some of the volume declines by raising prices and pushing premium brands. BAT announced a £1.5bn share buyback programme for 2013. It has recommended a final dividend of 92.7p a share to be paid on May 8 .